tv On the Move Bloomberg April 23, 2015 3:00am-4:01am EDT
request. recovery remains elusive. we will be talking about the trader. markets are pretty much dead flat. manus, what were you doing five years ago to the day? >> five years ago great government bonds and a few more institutions were slightly longer than they are today. bonds are trading at 12.97 percent. it takes one line to come from greece. convergence is clear. yesterday they were talking about a meeting of minds as we build toward the discussion. you saw the biggest move in german government bond yield in three months. it took that line to be like, maybe i will lighten up. the spain germany spread, the
italy german spread, all narrowed. some of the biggest moves we have seen in the market. convergence is absolutely clear. let's see what the detail is in terms of what is happening with the greeks. the greeks are going to receive a little more liquidity in terms of emergency funding. 10 points or 11 points coming off the london market today. dividend housing marks & spencer's doing a little better. in london equity markets are opening a little higher despite china seeing a slowdown in manufacturing numbers. let's get to some individual stories we are keeping an eye on. deutsche bank is said to be nearing a 2 billion euros settlement. ubs said $1.5 billion in
settlement. that was their record. some companies had 6.5 billion dollars. will they settle with regulators? stock up 1.4 5%. i suppose the issue is to get big litigation out of the way and crackdown on re-organizing your bank. they had a sales number at novartis that was interesting. operating numbers will be ahead of what they were originally. the stock up 2.2 percent. we are waiting for ericsson to open their margins. they took a 600 million kroner restructuring charge. mobile you're going to see a little softness. they got competitive in terms of alcatel and no kia -- nokia
coming together. these are three eyes -- three things to keep an eye on. 75, 55 is where it trades on the downside. the central bank says there is room to remain in this lower band of rates. they may have room to cut rates. that is where you see the big move. the new zealand dollar down 1.5%. back to you. >> thank you very much. three minutes into the open. the ftse 100 a little bit firmer. the dax is higher by 47 points in frankfurt. some data out of france. i'm getting used to saying this. the pmi's come in. manufacturing in contraction at 48.4. services coming in at 50.8. the composition pmi coming in
just an inch above expansion territory at 50.2. a little later we will get a reading on german manufacturing. we will get the same reading for the eurozone as a whole and the u.s. at two: 40 5 p.m. we will bring you those numbers as they cross. pmi data across the planet, we had some readings of manufacturing activity. both missed estimates. shanghai composition on a skyward trajectory despite the data. it is up more than 110%. let's begin with the data. we are joined by brian from tokyo. let's kick it off with china. this pmi figure is not very reassuring about the direction of the chinese economy, is it? brian: no the chinese economy is decelerating. what was disturbance --
disturbing is the weakness. that is part of the larger goal to wean china out of debt fueled investment led growth, and it is really being felt at the economic level. jonathan: we get excited about what the people's bank of china does. we know the bank of japan gets very busy. i am looking at japanese manufacturing slipping into contraction. what are the details, and what can policymakers do? brian: the manufacturing weakness is centered on domestic japanese companies that aren't getting a big currency boost like the big international exporters. that plus a week consumer economy has cap japan in the slow growth mode. -- kept japan in a slow growth mode. whether they are going to dip deeper into a more intensive qe program or try other things to
get the economy moving again. jonathan: i think there will be a temptation to look at these data points and talk about a regional slowdown. is that a step too far? is this a real domestic story for china and japan that they have their own problems internally? >> i think so. in china you have economic policy makers at war with themselves. they want to slow things down shift from debt fueled investment to a more balanced growth pattern. they are afraid of going below 7%. japan is calling out of deflationary environment and a recent recession, and they are very particular issues on both sides. jonathan: a big thanks for joining us. let's get the investors take. we are joined by the chairman of the investment committee.
stephen, great to have you with us. we can't talk about china without talking about the chinese equity markets. forget the data. it's only a bubble if you have not got a position in a bull market. what's your position on china? >> everything is a bubble because it is all about monetary policy. that has confounded pessimists that when you have aggressive easing and things like reserve requirements then you change the game. that is what has happened in china. it's hard to see that changing. >> for china specifically, when you see a weak data point everyone gets excited, and they say what is the bank of china going to do next? we know there is putting more space to cut the rate. at the same time bad loans nonperforming loans. how much space is there to get aggressive with rates? >> it's a trade-off, isn't it?
i think there will be more easy money to come. we have seen from the figures overnight that the fundamentals are deteriorating rapidly. it's going to be a tough one, hard for investors on the other side of the world to see a lot of clarity. >> the lag time of what the people's bank of china have done, when do you brian: expect to see that? typically, monetary policy has a lag. we have started easing the back end of last year. it probably won't be until 2016 that we see some sort of pick up . you have some savvy investors who are saying where you play this is looking at some commodity resource stocks that would be absolute trash. this is a perverse situation. the chinese stock market has doubled, yet all those companies that do business with china have
been absolutely trashed. there is an argument that if you see a genuine pick up in chinese business activity next year and maybe sometime this year, there are good access points being incredibly low prices. jonathan: do you agree? >> i do. long-term investing is about understanding markets are volatile and there are opportunities for entry and exit. the commodity super cycle story which a lot of people believed in, has unfortunately exploded. a lot of people lost their money on that. maybe the emerging markets story in china is the ultimate story. it will come back at some stage. jonathan: the debt overhang is pretty much present. you have seen a dollar dominated bond in china and a default in
china. do you expect more of that to come? some people think this is a good thing, a little discipline. >> we shouldn't be strangers to debt defaults. overhangs of substantial depth -- debts are not exclusive to china. we have seen when monetary authorities are sufficiently robust as they had been in europe then monetary policy does work. for investors taking longer-term views, perhaps they may have missed the shanghai move. perhaps the way to trade that was with commodity stocks. jonathan: coming up facebook does not like the dollar. we will talk about that. and it is another multibillion-dollar settlement on the horizon for big banking? just maybe. we will talk about that a little
talk about them. facebook and ebay cited as a cause for concern. >> those sales hit by a stronger dollar, so much that facebook missed analyst estimates. we are seeing many of the exporters in the u.s. for the first time since 2012 growth missed forecast. sales up 42%. it could have been 49% growth if you strip out the effect of the stronger dollar. clearly it did have a significant impact. if you are looking at the numbers, they were pretty
stellar overall. we were seeing strong revenue sales. we see a significant uptick. quality, reach, this is what they are seeing in advertising. mobile makes up three quarters of their advertising business. we all want to be on facebook on our phones. the company wants to target us the a are smart phones as well. 4 billion videos are watched per day on facebook. we are all logging on more. we are seeing 1.4 4 billion of us have a facebook account across the world. nearly one million of us are looking at it every single day. user growth advertising growth, and they are hiring like crazy. cap increased their headcount
48% in the last 12 months. cap have more than 10,000 working for them across the board. it seems people are more worried perhaps about the stronger dollar. the most important thing is boosting underlying business. many are convinced by mark zuckerberg's vision for the future. ebay's future is one to be worked out. they beat analyst estimates. sales, profit both grow despite the stronger dollar. we did see growth for both, even though we saw a loss. cutting growth, that's why they are able to reinflate profit. in two -- 2400 jobs went. investor splitting themselves up. the smooth separation of the paypal unit from the online market will occur in the third
quarter. that is clarity. everyone wants to know when that might happen. shareholders have had them under such a strain saying we want to do splits apart. there is more value in new separated. there is a fight for ebay going forward. paypal is bigger than ebay. paypal brings in more revenue in the quarter, so when they part ways, what then for the value of the marketplace? how does it cut back the presence of all the other retailers going online? what can it do to lure us back? jonathan: stephen isaacs is still with us. he is the chairman of the investment committee. the underlying numbers at facebook, the dollar takes a bite out of sales. you look at the move, and it is trading up 43 times estimated
earnings. how do you play these stocks? >> this isn't exactly a cheap stock. you have the fact that mark zuckerberg's shareholders are a second-class, and they are hiring like crazy. they are out of control. it looks i get fantastic stock. if you buy here, you need a huge amount to buy here. they are picking winners. this is a detailed game where you need absolute stockpicking skills. that's a skill some people have. jonathan: the market is dominated by huge macro top down. now we are talking about the u.k. situation as well. i have asked people about the u.k. situation. they tell me and matters, but no one has told me how to play it. can you invest around it? stephen: >> i don't think so.
the market didn't move. it's only over several years that you get the impact of less business friendly politics. i think that's arguably the case now. i happen to believe miliband will win. i think the polls are right. i don't think he will win the majority but they will form the next government. jonathan: why unfortunately? stephen: from a business point of view, higher taxes, greater regulation, discouragement, all of those are going to reduce the talent pool and make entrepreneurs less excited about investing in the u.k. jonathan: is it possible that labour came and spend, spend spend and created a little bit
of an economic boom in this country? >> you are talking about the end of austerity. that is why it is dangerous to play this. this is negative for sterling. it is a binary view. the tailwind of some of the measures the tories took an office will still be there, much as when tony blair came in. he had a fantastic tailwind that lasted almost 10 years. you already talk about longer terms of productivity, the speed limit of the economy i think will be changed with the new administration. jonathan: thank you very much for joining us. still to come we will get the latest dealers of the trader accused of participating in the 2010 flash crash. more on that after the break. ♪
matters because they are incorporating into the u.k. to try to save taxes. it's an inversion deal. we haven't talked about them in a while. you thought they would stop. they have not. i will bring you more details. the british trader contributing to the flash crash. conditions of the veil include that he sleeps at his parents they'll -- his parents home. what else to we know about his parents conditions? it's not clear that he has posted it yet. one condition is that he ponies up about 5 million pounds. that is the exact amount he has in one of his trading accounts.
his lawyer says he has that money, but it's not clear the court was able to confirm transfer of funds. there are a lot of interesting conditions of this bail. one is that he forfeits his passport. he has to be at the family home between the hours of 11 p.m. and 4 a.m. he has to be sharing the home with his parents. one of the conditions one condition is he is not able to interact with the internet at all. the next big hearing will be in august where he is going to say, i want to stay here in the u.k. back to you. >> thank you very much.
the best line i have heard is it is like trying to pinpoint a land ranger. >> i don't doubt that people try by leveraging, which you can do. i think the hope is you might in theory be able to influence the market. you are talking about the world's most liquid stock market. i think it's a fantasy to suggest one day this man was the cause of it. it's about making an example. i think they will probably
jonathan: good morning and welcome back. we are in bloomberg's european headquarters. let's get to that data out of germany. german manufacturing coming in at 51.9. that is a miss. services pmi comes in at 54.4. that is a miss. the composite comes in at 54.2. that is also a miss. we were looking for 55.6. let's bring you up euro-dollar. we had a miss across the board for french pmi data. the services number a miss. the come positive a miss as well.
we are seeing a similar story in germany. euro-dollar just missed session lows. let's get some more detail on the german pmi number. hans nichols in berlin. usually germany is the one that outperforms. this data is not so good. hans: surprisingly, there's a miss on the manufacturing. the manufacturing miss was the greatest of all three. it is manufacturing we expect to be stronger because of quantitative easing. in the last 3-4 weeks, we've had mixed economic numbers out of germany. there has been concern about the slowdown in greece. for the most part, the view was the german economy would be able to withstand that. on tuesday, you had the new gdp figures updated from 1.5% to 1.9%. the other data is troubling. earlier in the week, we got the
eew number -- the z.e.w. number. that was disappointing. a lot of attention is going to be paid to that number. jonathan: data disappointing. i imagine the railways disappointed of you people this morning. what is going on? hans: we've got a 2-3-day strike. the passenger strike is going on until the end of the night. huge, massive lines all throughout german rail stations. the local news have been playing it all morning. about two thirds of long-distance trains in germany are running. they will likely return to the negotiating table tomorrow. they seem to be at loggerheads. a lot of trains were canceled. some people were taking the bus.
some local stations reported that bus fares went from eight euros up to 16 or 21 euros. you can still get around, it is just going to cost you more on the bus. the commute times are a lot longer. that will affect productivity. the freight side of this story could affect the economy. jonathan: hans nichols, a man who does not take public transport. he is chauffeur driven. thank you very much. let's take you from berlin to frankfurt. deutsche bank is poised to settle u.k. and u.s. investigations into benchmark interest rates. according to someone familiar with the matter, it will run the bank about 2 billion euros. for more, let's get over to shane in frankfurt. how does that figure compare with georgia banks -- with deutsche bank's total legal provisions? shane: we know what they set
aside last year. about 3.2 billion euros for total litigation. they say they are expecting costs about 1.5 billion. that is roughly half of what they set aside. what we don't know is what the 3.2 billion is for and what the 1.5 billion is for. we've heard that a libor settlement could come as early as today. most people are assuming the vast majority of the 1.5 billion they are expecting will be for libor. we can't really know that. so many other things are also open at deutsche bank. they have investigations into forex dealings, asset-backed securities alleged u.s. sanctions violations and so forth area it is still open. it is a decent legal cost in the first quarter. jonathan: busy because they are in the middle of a strategy review.
what does the timing of the settlement mean if we get it eminently given the bank is in the middle of this review? shane: for management, they kind of want to get this out of the way. investors and analysts are saying the same thing. we've heard that tomorrow the supervisory board can meet and look at the options presented by management. next week, they are presenting first-quarter earnings. if they get a libor settlement today or as soon as possible they could get this off the table, go to the board, present their new strategy boost profitability at the bank, and put down some solid numbers next week and the situation could look very different. the timing is important here. jonathan: shane, thanks for joining us this morning. if we get the details, we will bring them to you here on bloomberg tv. busy morning of economic data.
we are at session lows on the dax. the ftse 100 is up by 0.05%. so many stocks to talk about. caroline: i've got one big mover for you in germany. it is goldfinger. it was once germany's second-biggest builder. it is an engineering services company. it is down 14%. ubs says they called it earlier. they said it is going to fall below 50 euros. down it goes. major profit warning is what analysts are saying. they are saying that profit will be below last year's. weaknesses in oil and gas hitting them. they made the new appointment of a chief executive, but no specific guidance coming out. we are going to get the new ceo
now taking charge of what is a really beleaguered builder. on the upside michelin up 5%. shares are up the most since 2012. first-quarter sales beating analyst estimates. unit sales of 1.5%. they are planning to do a buyback program over the next couple of years. they reiterate their outlook. they are saying, lower raw material prices is going to help. we are also going to see a favorable currency flow. all because of that week euro and strong dollar. let's check in on the drugs makers. novartis, the world's biggest drugmaker if you are looking at sales, up 1.3%. first-quarter profit beat analyst estimates. they are beginning to see the benefit of their restructuring.
they sold off their animal health business. they brought on more cancer drugs and formed that joint venture with glaxosmithkline. they are beginning to see the strength from this. now, the focus is on new drugs. this is a company seeing a lot of patents expire. they have to get new pipeline drugs. one of them, a heart failure drug. it does seem to be helping them in the future. the dollar does hurt. jonathan: caroline hyde, thank you very much. let's keep the conversation on pharma. we had novartis this morning. roche beat sales estimates yesterday. we are joined now by an analyst from geneva. great to have you with us this morning. the numbers from novartis great. let's skip all that and talk
about how busy this company has been in the last 12 months. they wrap up a deal with glaxo. they bought the glaxo cancer drugs as well. they formed a joint venture for their consumer health care products. how long does it take to shake this out and carry on delivering? >> you are right. the last year has been a transformational year for novartis. i would say they started the year very strongly, especially on the productivity side beating estimates by some 12% encore operating profit. as you said, glaxo oncology business only contributed one month, but we've seen now a big contribution from this business which is around $2 billion. as you said they've invested on
the vaccine business. that will also help on the margin. i would say that they are really improving. they have created novartis business services. that will also save on the cost. jonathan: good stuff. you call it a huge execution year for the company as well. two blockbuster drugs launching. what do you expect to come from them? odile: you are right. there are really two or three points here to highlight. the execution on the acquisition of glaxo oncology business, the launch of two products. the biggest one is lcz 696, a drug for chronic heart failure that showed strong benefits. we expect an approval in the
summer. that will drive the top line going forward. the other project has been approved for psoriasis. that is also a very important drug. they have good top line. they have innovation. jonathan: odile, i want to talk about the patent clear from generics as well. i looked at the data from bloomberg intelligence. more than $47 billion in sales hit due to generics. the so-called patent cliff period. this suggests generic erosion could drag sales by 78 alien dollars in 2014-2020. is novartis one of the big losers? odile: what may be important to
highlight is that during 2010-2013, it was mainly chemical compounds that lost patent protection. really easy to copy drugs. novartis still has -- [indiscernible] they will have some generic losses but more in 2017 or 2018. the biggest comes from the biologics. more difficult to copy. novartis is extremely well-positioned, with the leaders in what we call bio similars. they expect a number of launches in the coming years. that will also drive the top line and the margins. jonathan: we can talk about the products all morning. then you just look at the dollar.
it is the dollar story again for a lot of these companies. how much attention do you have to pay to that? odile: absolutely. novartis as well as astrazeneca, all companies reporting in u.s. dollars will be strongly impacted by the currency rates. novartis will have a 10% hit on the reported numbers and a 30% hit on the bottom line, which is very different from roche, that had only a 2% hit. some think that novartis needs to absorb on the reported numbers. if you look at the numbers on the currency really not changing, the numbers are really good. jonathan: odile rundquist, thank
you for joining us from geneva. i want to look at the markets before we head to the break. disappointing numbers out of not just france but germany as well. the two big economies in the eurozone. the dax now off by 110 points. euro-dollar, 0.4% weaker. so much to talk about. not just economic data, but greece as well. not so happy anniversary for that country. five years since the former prime minister officially requested a bailout. did he think we would be where we are five years forward? ♪
jonathan: good morning and welcome back. let's get trait to this top stories. petrobras released financial results since the scandal that cost the ceo her job. the firm reported a net loss of $7.2 billion last year. these and mastercard shares surged on wednesday after the chinese government ended the monopoly of union pay. visa was the biggest gainer on the dow yesterday rising by more than 4%. the european central doubled emergency funding for greek banks. they raised the cap by about 1.5
billion euros according to someone familiar with the matter. that brings the cache buffer to 2.9 billion euros. today marks the five-year anniversary of former greek prime minister requesting a bailout. needless to say, it is not a happy one for greece. the country remain settled with enormous debt. let's head out to hans nichols in berlin. guy johnson with us as well. disappointing data out of germany and france this morning. five years ago, did anyone think we would still be chasing that elusive recovery we'd still be talking about greece the way we are today? hans: you might have heard some voices that didn't think europe had the firepower, the bazookas. you did hear some of that, that europe was always a little bit reactive a little bit late. what you didn't hear was athens.
take a look at this quote from the then prime minister. "our european counterparts will act decisively to allow us to rebuild our ships using strong and reliable materials." guy johnson has spent a lot of time in greece, a lot of time on the port. does that port still have some wind in it? guy: i think the shipping companies are doing fine. i'm glad you are so familiar with my holiday history. it is the one bit of the greek economy that continues to function fine, the shipping industry. the threat is that if you tax the shipping industry aggressively, people start leaving. at some point the tax story has to get sorted out. some say this is the heart of the greek problems. you need to figure out a way of financing the economy to let it go. jonathan: ponds, the other big
challenge, five years ago when you restructure, you do it once so you don't have to do it again. they haven't done it well and we have to do it again. unless we get this euro bunch that grinds things out for another year. it seems like that is the direction things are headed in. hans: if you are talking about a third bailout package, you need to send me to finland. it will be very difficult for angela merkel to get a third bailout package through the bundestag. send me to helsinki. finland may be the biggest obstacle to getting a new third bailout package. we have to get through so much even before we get to a third bailout package. we have to complete the current program. greece has to figure out some way to unlock the cash to pay their bills. jonathan: hans nichols, thank you very much. guy, the market has done its
rollover on the back of some of that data. a very interesting move in the bond market yesterday. bond yields did something phenomenal. they rose. can't say that many times. guy: we are dealing with a heavy stock. jonathan: that is the best comparison. it is actually six basis points. guy: it isn't that much. so the markets i think are fairly jittery at the moment. the u.s. earnings season is interesting. you've got a lot to think about with greece coming up. i think people are really looking for a handle on what to hang their investment strategy and a lot of people are nervous about the bond markets. a lot of people are nervous that earnings aren't keeping pace with equity levels. we circled back again to qe, to monetary policy. it is not an unfamiliar debate. jonathan: u.k. politics of course. two gigs at the moment.
i watched a video yesterday of mr. salmond. is it going to be on the agenda? guy: i think it has to be on the agenda. the subtext is definitely there. this is always the story. i don't think nicolas sturgeon would have said that. what you've got is she is trying to back off, to make the snp more warm and fuzzy. that is not quite what we heard. this question of hugh is going to be in control -- jonathan: you have to ask the question of whether he would have done that 12 months ago. his position has changed somewhat. guy: that is a fair point as well. but he is going to be in charge. jonathan: i'll give my opinion on the break. you aren't going to hear it on live tv. let's wrap up the data.
eurozone data coming out in a couple minutes. u.s. pmi at 2:45 u.k. time. disappointing data out of france. disappointing data out of germany. eurozone composite out in just a couple minutes. equities just off session lows. the dax still down. euro-dollar, 1.0684. that is trading weaker as well. the markets just starting to roll over a little bit. euro-dollar down by 0.4%. if you want to talk about these markets, i'm on twitter and you can follow me there. ♪
guy: germany's business blues. will will bring you the eurozone manufacturing data next. francine: tsipras on the sidelines of a european immigration summit. guy: and, it could be the biggest libor fine yet. deutsche bank may pay two point -- $2 billion to settle a probe with the u.s. and u.k. welcome to "the pulse." we are here in london.